The two founding members of the new CPA Caucus in Congress, Rep. Brad Sherman, D-Calif., and Mike Conaway, R-Texas, gave an entertaining talk during a luncheon Monday at the AICPA’s Spring Meeting of Council.
Conaway had performed before the CPAs as part of the musical group, the Second Amendments, during a reception on Sunday evening at the conference (see AICPA Takes Its Case to Washington for Tax Reform).
They talked about how they agreed with many of the AICPA’s legislative priorities, including a ban on tax strategy patents. “First of all, the idea that you could patent compliance with the law is absurd,” said Sherman.
The AICPA has managed to get the ban inserted into patent reform legislation in both the House and Senate, but the larger patent reform bill has stalled over unrelated issues. The AICPA now appears ready to push to get a standalone tax strategy patent bill passed if the larger patent reform bill doesn’t make it across the finish line.
Both Sherman and Conaway described the fight in Washington over the budget deficit, the debt ceiling, and entitlement programs like Medicare.
“When we make these changes, either now or later, there will be hard things happening,” said Conaway. “There will be people who lose their jobs. There will be people who don’t get money from the federal taxpayer that they otherwise thought they were going to be getting, and that’s going to be hard. I am a cold-blooded accountant like most of you, but even I have sympathy for those folks. It’s going to be hard for them.” However, he added that he was confident their families, neighbors and communities would “rally to the flag and rally to those individuals and get those individuals through whatever it is they have to go through for the greater good.”
I asked them about a recent bill that had been introduced in Congress to allow the IRS to automatically fill out a basic tax return for people using the financial information it already receives from employers on the 1099 and W-2 forms (see Congressman Proposes Bill to Let the IRS Prepare Taxes).
Sherman said he hadn’t focused on that bill and would have to look at it, but that he had co-sponsored another piece of legislation that would make it easier for senior citizens to fill out a tax return. He believes the main challenge would be security.
“The old tax collector in me says, well, if the IRS tells you about the four bank accounts they did get reports on, you know that it’s purely voluntary whether you list that fifth bank account for which you have a 1099, but for some reason they don’t have on your report,” he said. “But I think the computerized sharing of information is so good, that’s probably pretty rare. It would make sense if you had a way of providing the security to be able to log on and to see a proposed tax return by the IRS and then be able to indicate what changes if any are needed.”
Conway disagreed with the idea of the IRS preparing the return. “I don’t think the IRS ought to be filling out our tax returns,” he said. “I think filling out your tax return ought to be painful enough that you understand what’s going on… With the way withholding taxes are, there are an awful lot of folks out there who don’t have a clue what they’re paying in taxes. They might know on April 15, but not throughout the year. We need that information to motivate folks to put up with the decisions they’re going to have to put up with. Simplify the Tax Code? Absolutely, but having the IRS do it, I would probably say no on that.”
Sherman said it might be a “teachable moment” for people whose federal income tax bill is only a few hundred dollars a year, compared to the thousands of dollars they were paying in Social Security taxes, but it probably wouldn’t be a good idea for the accountants in the room if the bill ever passed. “Most of the folks who would take advantage of it don’t use these guys,” said Conaway.